PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: RICHARD HAMLETT,

Debtor.
RICHARD HAMLETT,
Debtor-Appellant,

No. 02-1642

v.
AMSOUTH BANK,
Defendant-Appellee.

Appeal from the United States District Court

for the Western District of Virginia, at Roanoke.
James C. Turk, Senior District Judge.
(CA-02-463-7, BK-98-2653)
Argued: January 21, 2003
Decided: March 6, 2003
Before WILKINS, Chief Judge, and WILKINSON and
MOTZ, Circuit Judges.

Affirmed by published opinion. Judge Motz wrote the opinion, in

which Chief Judge Wilkins and Judge Wilkinson joined.

COUNSEL
ARGUED: Gary Michael Bowman, Roanoke, Virginia, for Appellant. Matthew Douglas Huebschman, JEFFREY A. FLEISCHHAUER, P.C., Roanoke, Virginia, for Appellee.

IN RE HAMLETT

OPINION
DIANA GRIBBON MOTZ, Circuit Judge:
Richard Hamlett appeals the district court judgment affirming two
orders of the bankruptcy court one vacating a prior default judgment against his creditor, Amsouth Bank, and one denying his motion
to avoid liens held by Amsouth. The bankruptcy court did not abuse
its discretion in vacating Hamletts default judgment on the ground
that he had not properly served Amsouth. Nor did the bankruptcy
court err in holding that its disallowance of Amsouths claims as
untimely did not void Amsouths underlying liens. Accordingly, we
affirm.
I.
The parties have stipulated to all relevant facts. In 1983, Hamlett
conveyed deeds of trust on several parcels of real property located in
Salem, Virginia to secure loans serviced by Dovenmuehle Mortgage,
Inc. for Amsouth Bank. At some point (neither the record nor the
briefs indicate exactly when), Hamlett filed a voluntary petition for
relief under Chapter 7 of the Bankruptcy Code. See 11 U.S.C.A.
701-28 (West 1993 and Supp. 2002). In the course of Hamletts
bankruptcy proceedings, Amsouth (through Dovenmuehle) filed
seven proofs of claim regarding its secured interests in Hamletts
property. Upon the trustees objection, the bankruptcy court disallowed five of these claims as not timely filed.
On October 23, 2000, Hamlett filed an adversary proceeding
requesting, pursuant to 11 U.S.C.A. 506(d) (West 1993), that the
court "avoid" the liens held by Amsouth on his properties. Hamlett
served his complaint by certified mail on Edward R. Parker,
Amsouths registered agent in Virginia. When Amsouth did not file
a responsive pleading and did not appear at the pre-trial conference,
Hamlett moved for a default judgment. On January 22, 2001, the
bankruptcy court granted the motion and ordered that the Amsouth
liens be "avoided."
In response, on January 30, 2001, Amsouth filed an answer to the
complaint and moved that the court set aside the default judgment on

IN RE HAMLETT

the ground that service on its registered agent did not comply with
Federal Rule of Bankruptcy Procedure 7004(h). See Fed. R. Bankr. P.
7004(h). The bankruptcy court vacated the default judgment, finding
service did not meet Rule 7004(h)s requirement that service be made
on an "officer" of the institution.
The bankruptcy court then proceeded to determine the merits of the
adversary proceeding, i.e., whether Amsouths liens were void under
506(d) because Amsouth had not timely filed its claims. The court
concluded that Amsouths failure to timely file its claims did not
automatically extinguish its underlying liens and thus ordered that
Hamletts "complaint/motion to avoid the liens [be] denied and dismissed."
Hamlett appealed both orders to the district court. After full briefing and oral argument, the district court affirmed, adopting as its
"findings and opinions" the rationale of the bankruptcy court. Hamlett
then noted a timely appeal to this court.
Because a district court sits as an appellate court in bankruptcy
matters, we apply the same standard of review that the district court
applied. In this case, we review the bankruptcy courts order vacating
Hamletts default judgment for abuse of discretion. See Park Corp. v.
Lexington Ins. Co., 812 F.2d 894, 895 (4th Cir. 1987). We review de
novo its order denying Hamletts motion to avoid Amsouths liens.
See In re Bunker, 312 F.3d 145, 150 (4th Cir. 2002); see also In re
Southeast Hotel Props. Ltd. Pship, 99 F.3d 151, 154 (4th Cir. 1996).
II.
The bankruptcy court vacated Hamletts default judgment against
Amsouth, finding that Hamletts service of process on Amsouth did
not comply with the requirement under Federal Rule of Bankruptcy
Procedure 7004(h) that service of process be made on an officer of
the institution. Hamlett argues that service on Amsouths registered
agent satisfied the requirements of the rule.
With exceptions not relevant here, Rule 7004(h) provides:

IN RE HAMLETT

Service on an insured depository institution (as defined in

section 3 of the Federal Deposit Insurance Act) in a contested matter or adversary proceeding shall be made by certified mail addressed to an officer of the institution.
Fed. R. Bankr. P. 7004(h).
In support of his contention that service on Amsouths registered
agent satisfied Rule 7004(h), Hamlett focuses initially not on the language of the rule, which was enacted as part of the Bankruptcy
Reform Act of 1994, but on its legislative history. In fact, neither the
plain language of Rule 7004(h) nor its history support Hamletts position.
A comparison of Rule 7004(h)s language with that of other federal
rules governing service of process on non-governmental entities and
corporations clearly evidences a Congressional intent to fashion more
rigorous service of process requirements for adversary proceedings
initiated against insured depository institutions. For example, Rules
4(d)(2)(A) and 4(h) of the Federal Rules of Civil Procedure and Rule
7004(b)(3) of the Federal Rules of Bankruptcy Procedure, all of
which were promulgated prior to Rule 7004(h), provide for service of
process on "an officer, a managing or general agent, or on any other
agent authorized by appointment or by law." In contrast, Rule 7004(h)
does not contain any of the language referring to agents, but instead
provides for service solely on "an officer of the institution." Congress
could easily have included within Rule 7004(h) the same "general" or
"authorized" agent language contained in the other rules. Indeed, simply adopting the language of the other rules would seem to have been
the easiest course. That Congress did not do this indicates clearly that
it did not deem service on a designated "agent" sufficient under Rule
7004(h).
The Rules legislative history bears this out. Contrary to Hamletts
suggestion that the "only" purpose of the Rule was "to require that
service of process on a bank be accomplished by certified mail," the
legislative history indicates that Congress added Rule 7004(h) largely
in response to the perceived need to grant additional safeguards to
depository institutions involved in adversary proceedings. See 139
Cong. Rec. S707-10 (daily ed. Jan. 26, 1993) (discussing bill to

IN RE HAMLETT

amend Rule 7004 to require that service of process on an insured

depository institution be made upon an officer of the institution); 140
Cong. Rec. S4576-77 (daily ed. April 20, 1994) (same). In doing so,
Congress apparently determined that requiring service of process by
certified mail and restricting such service to an "officer" of these
institutions would achieve this goal. Thus, nothing in the Rule itself
or its history suggests that Congress intended the term "officer" in
Rule 7004(h) to include "registered agent."
Hamlett also seeks to rely on Virginia law for his contention that
service on Amsouths registered agent was proper. He first maintains
that under Virginia law "a corporation is not required to appoint a registered agent, but if it does appoint a registered agent," as Amsouth
did, then service on that agent satisfies Virginia law and, by extension, Rule 7004(h). Alternatively, Hamlett contends that in designating a registered agent, Amsouth effectively waived its entitlement to
service of process on "an officer of the institution." Both of these
arguments fail.
First, Hamlett misreads Virginia law. Under the law of Virginia,
Amsouth, a foreign corporation doing business in Virginia, must designate a registered agent, but service on that agent is "not . . . necessarily the required means of serving a corporation." See Va. Code
13.1-637(C) (Lexis Supp. 2002) (stating that provision of the code
identifying registered agent as corporations agent for service of process does not prescribe the required means of serving a corporation);
id. 13.1-763 (requiring each foreign corporation seeking to do business in Virginia to maintain a registered agent). Thus, service on
Amsouths registered agent does not necessarily satisfy Virginia
requirements, let alone Rule 7004(h). Furthermore, since Virginia law
requires Amsouth to designate a registered agent, the banks action
in doing so cannot be read as any sort of waiver of its right to receive
service on "an officer of the institution" as provided for under the federal rule.
Moreover, even if Hamlett had not misread Virginia law, he could
not prevail because, as Amsouth notes, "state law should not and does
not preempt federal procedural law" in this context. See Fed. R.
Bankr. P. 1001 ("The Bankruptcy Rules and Forms govern procedure
in cases under title 11 of the United States Code."); see also In re

IN RE HAMLETT

Edmonston, 107 F.3d 74, 76 n.2 (1st Cir. 1997) ("The Bankruptcy
Rules govern procedure in all bankruptcy proceedings unless inconsistent with either Title 11 or Title 28, United States Code."); Diamond Mortg. Corp. of Ill. v. Sugar, 913 F.2d 1233, 1241 (7th Cir.
1990) (holding that the Federal Rules of Bankruptcy Procedure apply
to adversary proceedings "without regard to judicial forum"); In re
Mycro-Tek, Inc., 191 B.R. 188, 191 (Bankr. D. Kan. 1996) (finding
that Rule 7004 supercedes the state rule for service of process).
Accordingly, we agree with the district court that the bankruptcy
court did not abuse its discretion in vacating the default judgment.
Rule 7004(h) clearly requires service on an "officer" of an insured
depository institution, and we see no basis for concluding that a registered agent should be treated as an "officer" of the institution under
the Rule.
III.
As to the merits of the adversary proceeding, Hamlett argues that
the district court erred in refusing to conclude that the "disallowance"
of Amsouths claims in the bankruptcy proceedings voided the liens
held by Amsouth on Hamletts property. The parties agree that
Amsouth did not timely file its claims and that this provided the only
basis for the bankruptcy courts initial decision to void the liens.
Section 506(d)(2) of the Bankruptcy Code provides:
(d) To the extent that a lien secures a claim against the
debtor that is not an allowed secured claim, such lien is
void, unless
(2) such claim is not an allowed secured claim due
only to the failure of any entity to file a proof of
such claim under section 501 of this title.
11 U.S.C.A. 506(d)(2) (West 1993). Hamlett contends that
Amsouths claims were not "allowed secured claims" under
506(d)(2) and "therefore, the liens are void." Read literally and in
isolation, this provision provides some support for Hamletts argu-

IN RE HAMLETT

ment. But established Supreme Court and circuit precedent render his
argument untenable.
More than a century ago, the Supreme Court held that a bankruptcy
discharge of a secured creditors claim does not affect the status of
the creditors underlying lien on the debtors property. See Long v.
Bullard, 117 U.S. 617, 620-21 (1886) ("Here the creditor neither
proved his debt in bankruptcy nor released his lien. Consequently his
security was preserved notwithstanding the bankruptcy of his
debtor."). Over the years, the Court reiterated this holding. See, e.g.,
Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 582-83
(1935) (holding that mortgage was not disturbed by bankruptcy proceedings); United States Natl Bank v. Chase Natl Bank, 331 U.S. 28,
33 (1947) (stating that a secured creditor "may disregard bankruptcy
proceedings, decline to file a claim, and rely solely upon his security
if that security is properly and solely in his possession").
Congresss overhaul of the Bankruptcy Code in 1978 raised some
questions as to whether this well-established pre-Code principle survived. See Bankruptcy Reform Act of 1978, Pub. L. 95-598, 92 Stat.
2549. The new Code itself did not expressly articulate this principle,
and the language of the Code, including 506(d) on which Hamlett
relies here, certainly could be read to have eliminated it.1 In 1992,
however, resolving a circuit conflict on the issue, the Supreme Court
concluded that despite this language, it was "not convinced that Congress intended to depart from the pre-Code rule that liens pass
through bankruptcy unaffected." Dewsnup v. Timm, 502 U.S. 410,
417 (1992). Accordingly, over a strong dissent relying on the "plain
language" of the Code, six members of the Court held that this preCode principle survived the 1978 enactment: under the new Code, as
before, "the creditors lien stays with the real property until the foreclosure." Id.
1

Congress amended section 506(d) in 1984, adding the new section

506(d)(2) to clarify that mere failure to file a proof of claim in a bankruptcy proceeding was not a proper basis for avoiding the underlying lien
that secured a disallowed claim. See Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. 93-353, 448(b), 98 Stat. 374.

IN RE HAMLETT

In doing so, the Court expressly rejected an argument, like Hamletts, that a creditors decision to participate in the bankruptcy proceedings puts the value of that creditors valid underlying lien at risk.
The Court reasoned that since a creditor "surely" would retain a lien
if he "stayed aloof from the bankruptcy proceeding," it saw "no reason why his acquiescence in that proceeding would cause him to
experience a forfeiture of the kind the debtor proposes." Id. at 417-18.
The case at hand, of course, does not involve the precise issue
resolved in Dewsnup. See id. at 412 (holding that 506(d) does not
permit "a debtor to strip down a creditors lien on real property to
the value of the collateral, as judiciously determined, when that value
is less than the amount of the claim secured by the lien"). But the
rationale in Dewsnup and its explicit embrace of the principle that a
lien passes through bankruptcy proceedings unaffected severely
undermine Hamletts argument.
Moreover, in a pre-Dewsnup case, the Seventh Circuit employed
the same principle in rejecting an argument identical to Hamletts. See
In re Tarnow, 749 F.2d 464, 466 (7th Cir. 1984). In that case, the
creditor had a valid security interest on the debtors crops and equipment. The debtor filed for bankruptcy, and two months after the bar
date for filing proofs of claim, the creditor filed its proof of claim.
Because of the late filing, the bankruptcy court not only disallowed
the claim, but also extinguished the creditors lien. Id. at 464. The
creditor appealed only the judgment avoiding its lien. The Seventh
Circuit reversed, holding that the failure of the creditor to timely file
its claims in the bankruptcy proceedings did not extinguish the underlying lien. Id. at 466-67.
Although the Tarnow court recognized that "read literally" 506(d)
seemed to support the debtors position, it concluded that the wellestablished rule "permitting liens to pass through bankruptcy unaffected" supported the conclusion that the "intended meaning" of
506(d) is "to allow the bankruptcy court to determine whether a creditor has a valid secured claim, and if he does not to make the lien
the security fall with the claim." Id. at 466. In other words,
506(d) only empowers the bankruptcy court to void liens supporting
disallowed claims if it judges those liens to be invalid in substance.

IN RE HAMLETT

This view comports with the 1984 amendment to 506(d), adding

506(d)(2), which clarifies that Congress did not intend for a perfectly valid lien to be extinguished any time a creditors claim on the
bankrupt estate is disallowed. Of course, that provision does not
explicitly refer to claims that are disallowed merely because they
were filed after the bar date. But we conclude, following the reasoning set forth in Tarnow, that the failure to file a timely claim, like the
failure to file a claim at all, does not constitute sufficient grounds for
extinguishing a perfectly valid lien. Id. at 467. The contrary result,
which Hamlett seeks here, would lead to considerable inequity:
The destruction of a lien is a disproportionately severe sanction for a default that can hurt only the defaulter. . . . While
no one wants bankruptcy proceedings to be cluttered up by
tardy claims, the simple and effective means of discouraging
them is to dismiss the claim (that is, the claim against the
bankrupt estate, as distinct from the claim against the collateral itself), out of hand, because it is untimely. . . . If an
ordinary plaintiff files a suit barred by the statute of limitations, the sanction is dismissal; it is not to take away his
property. And a lien is property.
Id., 749 F.2d at 465-66.
Tarnow has been cited and followed by numerous courts. The
Eighth Circuit, for example, has relied on it in similarly interpreting
506(d)(2) to hold that a bankruptcy court erred in "disallowing and
extinguishing the . . . lien because of the untimely filing." In re BeMac Transp. Co., Inc., 83 F.3d 1020, 1027 (8th Cir. 1996); see also
In re Thomas, 883 F.2d 991, 997 (11th Cir. 1989) (holding creditors
"lien not voided by the fact that the debtors passed the interest they
had in the mobile home through bankruptcy"). No court has held to
the contrary in the Chapter 7 context.2
2

Of course, Tarnow, along with the general proposition that liens survive bankruptcy unaffected, has been distinguished in cases involving
reorganization plans under Chapter 11 of the Bankruptcy Code where the
lienholder participated in the plan and the plan did not expressly preserve
the lien. See, e.g., In re Regl Bldg. Sys., Inc., 254 F.3d 528, 533 (4th Cir.

10

IN RE HAMLETT

Until today, we have not addressed a situation precisely like that

in Tarnow. But we have, in a case concerning the effect of a Chapter
13 plan upon a creditors liens, quoted with approval the Tarnow reasoning:
Section 506(d) voids a lien that secures a claim against the
debtor, unless the claim is not treated as an allowed secured
claim simply because the creditor has elected not to file a
proof of claim. . . . Subsection (2) was intended "to make
clear that the failure of the secured creditor to file a proof
claim is not a basis for avoiding the lien on the secured creditor."
Cen-Pen Corp. v. Hanson, 58 F.3d 89, 93-4 (4th Cir. 1995) (quoting
In re Tarnow, 749 F.2d at 467) (footnote omitted) (emphasis in original). We there explained that "[a] bankruptcy discharge extinguishes
only in personam claims against the debtor(s), but generally has no
effect on an in rem claim against the debtors property." Cen-Pen, 58
F.3d at 92. Thus, even though a secured creditor may lose its right to
participate in the distribution of the bankrupt estate (by virtue of having its claims against the bankrupt estate disallowed), the disallowance of its claim does not necessarily void its lien.
Hamlett acknowledges that "[u]nder 506(d)(2) . . . Amsouths
lien[s] would have passed through bankruptcy if Amsouth had not
filed a claim," but insists that "the facts of this case establish that
Amsouth filed a claim which was disallowed and, if the plain language of 11 U.S.C. 506(d) is applied, Amsouths lien is void." His
only response to the precedent cited above is to assert that it is
"wrong." Whatever the philosophical merits of Hamletts contention,
they do not persuade us to disregard a principle expressly recognized
2001) (extinguishing creditors lien which was not expressly preserved
by a Chapter 11 reorganization plan); In re Penrod, 50 F.3d 459, 463-64
(7th Cir. 1995) (extinguishing creditors pre-existing lien after confirmation of Chapter 11 reorganization plan that did not expressly preserve the
lien); In re Wise, 41 B.R. 51, 52 (Bankr. W.D. La. 1984) (voiding a lien
held by a secured creditor whose claim had been disallowed because of
untimely filing in Chapter 11 bankruptcy proceeding).

IN RE HAMLETT

11

by the Supreme Court and embraced by one of our own recent cases
to arrive at a disposition that would create a circuit conflict.
Accepting Hamletts argument would mean that although a lien
remains intact despite a creditors total failure to file a claim, a lien
would be extinguished whenever a creditor filed a valid claim after
the bar date; i.e., attempted compliance with the Bankruptcy Codes
procedure for filing a claim would place an underlying lien at risk,
while complete refusal to participate in the bankruptcy proceedings
does not. Given the Supreme Courts holding in Dewsnup, 502 U.S.
at 417, that "liens pass through bankruptcy unaffected," even if
506(d)(2) could be read to require the result Hamlett seeks, adopting
that interpretation would produce "a result demonstrably at odds with
the intentions of its drafters." United States v. Ron Pair Enterprises,
Inc., 489 U.S. 235, 242 (1989) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571 (1982)).
Accordingly, like the district court, we conclude that the bankruptcy court correctly found that Amsouths liens were not extinguished by its failure to timely file its claims against the bankrupt
estate.
IV.
For the foregoing reasons, the judgment of the district court is
AFFIRMED.